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Homefinder · 09-06-2008, 04:31 PM

A couple of interesting articles from good old "Auntie BBC"

Credit Crunch to last until 2010 - Which gives an idea of the state of the UK ecomony.

Credit Crunch around the World - This one is really interesting because it focuses on the whole world. It says that the US economy is still expanding, Europe is up the creek without a paddle and European banks have probably lost more than others. However, so economies are actually booming and banks can't lend money fast enough.

Homefinder

Richie · 09-07-2008, 10:53 AM

Interesting to see that Denmark is already in recession, haven't heard anything about other countries except Spain, the UK and the US really.

Another article about the recession in Denmark on the BBC.

Homefinder · 09-07-2008, 03:41 PM

I think that this recession could have more implications that has yet been realised. As the more prosperous nations (Europe, USA etc.) rein-in their spending it is going to affect the countries that export to them such as China, Indonesia, Japan etc. and, in the end, the oil and gas producers.

Homefinder

Colin S · 09-08-2008, 06:18 PM

I can't get the first link to work!

However, the title is a little on the optimistic side if you ask me. A credit crunch (and this is really the first time the world has seen such an event to such an extent) won't go away within 3 years. You have to be looking at much more long term than that but the problem with the world isn't just a credit crunch.

A credit crunch is where there is a short supply of cash available for loans and also of high interest rates. At present, the interest rates are not particularly high but they will almost certainly increase causing more of a problem.

Where everybody is talking about a credit crunch they have to take in to account belt tightening by individuals, not due to the fact that they don't have money or they are busy paying off their credit card but due mainly to sky rocketing prices of things like fuel which, in turn forces prices up for just about every commodity you and I purchase meaning that in the long run, wages remain dormant, interest rates on the money you have borrowed get higher causing an increase in payment to clear the debt and general goods that you purchase are getting higher and higher every day.

So far, nobody has found a solution to what is a vicious circle and I fear that many institutions are adding to the problem with scaremongering in the press and as one economy falters, so will another and this I am certain will cause a world problem overall so while some don't appear to be suffering at the moment they almost certainly will do in the end.

If we come out of this by 2010 I'll eat my shorts!

Homefinder · 09-08-2008, 07:35 PM

Credit Crunch to last until 2010 - Which gives an idea of the state of the UK ecomony.
Sorry, that was a bad URL. I have corrected it now!

Quote:

However, the title is a little on the optimistic side if you ask me. A credit crunch (and this is really the first time the world has seen such an event to such an extent) won't go away within 3 years. You have to be looking at much more long term than that but the problem with the world isn't just a credit crunch.

What the BBC article says is that the credit crunch in the UK will end by 2010 and property values bottom out. Personally I think that there is some sense in this as the UK has a tight economy that is well under control and it is better now that it is controlled by the B of E and not politicians.
In times like this the large economies, like Europe, become unmanagable because all the different elements have different requirements. It is already being said that now the "flying pigs" (Spain, Portugal, Greece and Italy) have come crashing down to earth the only quick solution for them is devaluation but they can't do that any more and the rest of Europe has to support them.
Meanwhile the UK can devalue - and it has!
Things to remember as well are that a weak pound helps exports and the UK still has a bit of oil and gas.
They pulled the econamy back quick enough in the 90's after they got out of the ERM, so I think that they will do it again.

What happens here in Spain is another ball-game entirely and, as the UK is Spains biggest customer for real estate, it is going to be a few years on from 2010 before the Brits generate a bit of equity to borrow on for second homes.
When Colin said that it would take about 5 years, my guess is that 2013 is just about right. However, a bit before that when prices are at their lowest ebb we shall see the "carpert-baggers" again, buying up all the cheap property in sight.

Quote:

If we come out of this by 2010 I'll eat my shorts!

Don't forget to take them off first!

Homefinder

agentyumi · 09-09-2008, 04:55 PM

The Credit Crunch – In 2008 The Worst May Keep Getting Worse
By: Satyajit Das

2007 may come to associated with the start of the "big" credit crunch. 2008 has begun with a number of "unresolved" items. Hope of an early resolution seems to be fading. In the words of Lily Tomlin, the American comedian: "Things are going to get a lot worse before they are going to get worse."

The total level of sub-prime losses is still far from clear. Based on current trading levels of ABS indices, estimates of losses range between US$ 150 and 400 billion, not all of which has been written off to date.

Interest rates on large volumes of sub-prime mortgages – estimated at around US$ 900 billion are due to reset by end 2008. Interest rates and repayments will rise significantly. The impact on delinquencies and losses are unknown. The rate reset freeze plan (which has not been in the news since being announced) and its impact are also still unclear.

As America’s mortgage markets began unravelling, economists initially pointed to sub-prime mortgages issued to low-income, minority and urban borrowers. Closer analysis reveals risky mortgages in nearly every corner of the USA. Analysis by The Wall Street Journal indicates that from 2004 to 2006, when home prices peaked in many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined US$1.5 trillion in high-interest-rate, high risk loans. The potential losses on these loans are unknown.

There are also emerging concerns in the US$915 billion credit card debt markets. Credit card providers are all boosting loan loss provisions. There is anecdotal evidence that cash strapped mortgagors are using credit cards to make mortgage payments. Analysts expect credit card delinquencies to increase if consumers unable to use home-equity lines of credit to pay off their credit card debt start running up higher card debt. A number of banks have begun to boost reserves against anticipated losses.

Financial institutions have already incurred losses of over US$100 billion. A substantial volume of assets is likely to return onto bank balance sheets as off-balance sheet structures and hedge funds are forced to sell. The total amount to be re-intermediated by banks may be in the range of US$1 to 2 trillion. This will make substantial depends on bank liquidity and capital.